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Is natural gas set for a U.S. road trip?

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Is natural gas set for a U.S. road trip?

By Robin Wylie

About gas

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Favorable U.S. market forecasts for natural gas could lead to its increased use as a road fuel, according to a new study…

Natural gas is making a break for it in the United States. During the late 1990s and early 2000s, the prices of natural gas and crude oil in the United States closely tracked one another, generally (barring a few spikes) rising and falling in tandem. But starting in 2008, when both oil and gas prices fell dramatically due to the global recession, the connection between the two broke.
Between 2009 and 2014, U.S. oil prices (which had bounced back) stayed high, at more or less their pre-2008 level, while natural gas prices, thanks to the stratospheric rise of U.S. shale gas production, stayed at their post-recession low.
A drop in oil prices in late 2014, brought the two closer together once more, but this is not expected to last: the United States Energy Information Administration (EIA) predicts that over the next 30 years, the break between natural gas and oil prices in the country will continue, and that the two will diverge significantly. By 2050, natural gas will rise by around $3 per million Btu, while the price of oil will rise by around $10 per million Btu.

The prof. Brown

And this predicted divergence between natural gas and oil could have significant consequences for US road transport, according to a recent study.
Writing in the journal Energy Policy, Stephen Brown, a professor of economics at the University of Nevada, Las Vegas, examined the EIA’s projections for natural gas and oil prices, coupled with market developments and economic research, in order to assess the outlook for natural gas as a transport fuel in the United States.
Brown concludes that the projected divergence in oil and natural gas prices “will provide a substantial cost advantage to natural gas as a transportation fuel over petroleum products during the next 30-plus years.”

A shale gas well in Pennsylvania, USA (Jeremy Buckingham, Flickr)

In particular, Brown points to the EIA’s projection for the costs associated with using natural gas as a transportation fuel, compared to those for diesel fuel, which suggest a growing cost advantage for gas. The EIA forecasts that by 2030, using natural gas as a transport fuel will be $1.50 cheaper per gallon than using diesel – around three times cheaper than it is currently — and will rise to around $2.00 per gallon cheaper in 2050.
Despite their prediction of lower natural gas prices, the EIA only forecasts moderate gains in natural gas use in the transportation sector, projecting a rise of 67 percent by 2050 – from approximately 2.7 percent of vehicles today, to a predicted 4.5 percent by 2050.
Based on his analysis, however, Professor Brown believes that “the U.S. could see much greater consumption of natural gas in the transportation sector and reduced consumption of petroleum products than is currently forecast.”

Full-scale consuption

Whether the EIA’s prediction for natural gas fuel is met, or exceeded, on the road, will likely come down to one main factor: infrastructure. Cheap fuel is all well and good, but drivers won’t make the switch to natural gas-based fuels if they can’t top up reliably, and the number of fuel stations carrying natural gas products (either Compressed Natural Gas (CNG) or Liquid Natural Gas (LNG)) is currently far too low to facilitate the wide-scale adoption of these fuels.
The higher cost of natural gas vehicles is also a barrier to the expansion of natural gas as a road fuel, albeit a smaller one, since the lower price of natural gas road fuels mean that vehicles can recoup the initial cost of investment within around three years, even without government incentives (for a heavy-duty truck running on LNG).
To achieve greater penetration of natural gas-powered vehicles, Brown suggests that government policy may be necessary to help overcome the advantages of the existing network to support diesel fueling stations.
He adds that the increased adoption of natural gas as a road fuel would have lower costs, increase security by using domestically produced energy resources, and reduce emissions (natural gas vehicles generally emit 13-21 percent fewer greenhouse gases than comparable gasoline and diesel vehicles).
In a world so clearly addicted to petroleum-based fuels for transport, this may seem like a stretch. However, there are reasons for optimism. Policy makers in California — which has by far the greatest number of vehicles of any U.S. state — have sponsored studies to determine whether natural gas can be a “bridge” to low carbon fuels in the transportation sector (as it is widely considered to be in the energy sector).
If the U.S. can capitalize on the economic potential of natural gas with sufficient political action, it it set to reap both financial and economic benefits.

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